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Segment Reporting | 12 Months Ended
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Dec. 31, 2018
Disclosure Text Block |
Segment Reporting | Note 39 – Segment reporting The Corporation’s corporate structure consists of two reportable segments – Banco Popular de Puerto Rico and Popular U.S. These reportable segments pertain only to the continuing operations of Popular, Inc. Management determined the reportable segments bas ed on the internal reporting used to evaluate performance and to assess where to allocate resources. The segments were determined based on the organizational structure, which focuses primarily on the markets the segments serve, as well as on the products a nd services offered by the segments. Banco Popular de Puerto Rico: Given that Banco Popular de Puerto Rico constitutes a significant portion of the Corporation’s results of operations and total assets at December 31, 2018, additional disclosures are provided for the business areas included in this reportable segment, as described below: Commercia l banking represents the Corporation’s banking operations conducted at BPPR, which are targeted mainly to corporate, small and middle size businesses. It includes aspects of the lending and depository businesses, as well as other finance and advisory servi ces. BPPR allocates funds across business areas based on duration matched transfer pricing at market rates. This area also incorporates income related with the investment of excess funds, as well as a proportionate share of the investment function of BPPR. Consumer and retail banking represents the branch banking operations of BPPR which focus on retail clients. It includes the consumer lending business operations of BPPR, as well as the lending operations of Popular Auto and Popular Mortgage. Popular Auto focuses on auto and lease financing, while Popular Mortgage focuses principally on residential mortgage loan originations. During 2018, the Reliable brand was transferred to Popular, Inc. and is being used by Popular Auto. The consumer and retail banking a rea also incorporates income related with the investment of excess funds from the branch network, as well as a proportionate share of the investment function of BPPR. Other financial services include the trust and asset management service units of BPPR, t he brokerage and investment banking operations of Popular Securities, and the insurance agency and reinsurance businesses of Popular Insurance, Popular Insurance V.I., Popular Risk Services, and Popular Life Re. Most of the services that are provided by th ese subsidiaries generate profits based on fee income. Popular Insurance V.I. was dissolved on December 31, 2018. Popular U.S.: Popular U.S. reportable segment consists of the banking operations of Popular Bank (PB), E-LOAN, Inc., Popular Equipment Finance, Inc. and Popular Insurance Agency, U.S.A. PB operates through a retail branch network in the U.S. mainland under the name of Popular, whil e E-LOAN, Inc. supported PB’s deposit gathering through its online platform until March 31, 2017, when said operations were transferred to Popular Direct, a division of PB. During 2017, the E-LOAN brand was transferred to Popular Inc. and is being used by BPPR to offer personal loans through an online platform. Popular Equipment Finance, Inc. also holds a running-off loan portfolio as this subsidiary ceased originating loans during 2009. Popular Insurance Agency, U.S.A. offers investment and insurance servi ces across the PB branch network. The Corporate group consists primarily of the holding companie s Popular, Inc., Popular North America, Popular International Bank and certain of the Corporation’s investments accounted for under the equity method, includin g EVERTEC and Centro Financiero BHD, Leon. The Corporate group also includes the expenses of certain corporate areas that are identified as critical to the organization including: Finance, Risk Management and Legal. The accounting policies of the individual operating segments are the same as those of the Corporation. Transactions between reportable segments are primarily conducted at market rates, resulting in profits that are eliminated for reporting consolidated results of operations. Effective on January 1, 2019, the Corporation’s management changed the measurement basis for its reportable segments. Historically, for management reporting purposes, the Corporation had reversed the effect of the intercompany billings from Popular Inc., holding company, to its subsidiaries for certain services or expenses incurred on their behalf. In addition, the Corporation used to reflect an income tax expense allocation for several of its subsidiaries which are Limited Liability Companies (“LLCs”) and had made an election to be treated as a pass through entities for income tax purposes. The Corporation’s management has determined to discontinue making these adjustments, effective on January 1, 2019, for purposes of its management and reportable segment reporting. The Corporation will reflect these changes in the measurement of the reportable segments’ results prospectively beginning on January 1, 2019. The tables that follow present the results of operations and total assets by reportable segments:
December 31, 2018
|  |  |  | Banco Popular |  |  |  | Intersegment
(In thousands) |  |  |  | de Puerto Rico |  | Popular U.S. |  | Eliminations
Net interest income |  |  | $ | 1,482,178 | $ | 304,576 | $ | (2)
Provision for loan losses |  |  |  | 198,442 |  | 29,881 |  | -
Non-interest income |  |  |  | 592,938 |  | 19,988 |  | (560)
Amortization of intangibles |  |  |  | 8,620 |  | 665 |  | -
Depreciation expense |  |  |  | 43,504 |  | 9,053 |  | -
Other operating expenses |  |  |  | 1,073,012 |  | 182,154 |  | (546)
Income tax expense |  |  |  | 121,195 |  | 25,294 |  | -
Net income |  |  | $ | 630,343 | $ | 77,517 | $ | (16)
Segment assets |  |  | $ | 38,037,696 | $ | 9,381,636 | $ | (114,923)
December 31, 2018
|  | Reportable |  |  |  |  |  |
(In thousands) |  | Segments |  | Corporate |  | Eliminations |  | Total Popular, Inc.
Net interest income (expense) | $ | 1,786,752 | $ | (51,875) | $ | - | $ | 1,734,877
Provision (reversal) for loan losses |  | 228,323 |  | (251) |  | - |  | 228,072
Non-interest income |  | 612,366 |  | 42,914 |  | (2,786) |  | 652,494
Amortization of intangibles |  | 9,285 |  | 41 |  | - |  | 9,326
Depreciation expense |  | 52,557 |  | 743 |  | - |  | 53,300
Loss on early extinguishment of debt |  | - |  | 12,522 |  | - |  | 12,522
Other operating expenses |  | 1,254,620 |  | 94,640 |  | (2,846) |  | 1,346,414
Income tax expense (benefit) |  | 146,489 |  | (26,947) |  | 37 |  | 119,579
Net income (loss) | $ | 707,844 | $ | (89,709) | $ | 23 | $ | 618,158
Segment assets | $ | 47,304,409 | $ | 5,099,491 | $ | (4,799,323) | $ | 47,604,577
December 31, 2017
|  |  |  | Banco Popular |  |  |  | Intersegment
(In thousands) |  |  |  | de Puerto Rico |  | Popular U.S. |  | Eliminations
Net interest income |  |  | $ | 1,279,844 | $ | 280,946 | $ | (217)
Provision for loan losses |  |  |  | 253,032 |  | 77,944 |  | -
Non-interest income |  |  |  | 364,164 |  | 20,430 |  | (572)
Amortization of intangibles |  |  |  | 8,713 |  | 665 |  | -
Depreciation expense |  |  |  | 39,162 |  | 8,553 |  | -
Other operating expenses |  |  |  | 957,924 |  | 170,042 |  | (551)
Income tax expense |  |  |  | 72,741 |  | 191,749 |  | (93)
Net income (loss) |  |  | $ | 312,436 | $ | (147,577) | $ | (145)
Segment assets |  |  | $ | 34,843,668 | $ | 9,168,256 | $ | (16,992)
December 31, 2017
|  | Reportable |  |  |  |  |  |
(In thousands) |  | Segments |  | Corporate |  | Eliminations |  | Total Popular, Inc.
Net interest income (expense) | $ | 1,560,573 | $ | (58,609) | $ | - | $ | 1,501,964
Provision for loan losses |  | 330,976 |  | 403 |  | (5,955) |  | 325,424
Non-interest income |  | 384,022 |  | 37,949 |  | (2,804) |  | 419,167
Amortization of intangibles |  | 9,378 |  | - |  | - |  | 9,378
Depreciation expense |  | 47,715 |  | 649 |  | - |  | 48,364
Other operating expenses |  | 1,127,415 |  | 74,731 |  | (2,692) |  | 1,199,454
Income tax expense (benefit) |  | 264,397 |  | (35,835) |  | 2,268 |  | 230,830
Net income (loss) | $ | 164,714 | $ | (60,608) | $ | 3,575 | $ | 107,681
Segment assets | $ | 43,994,932 | $ | 5,046,153 | $ | (4,763,748) | $ | 44,277,337
December 31, 2016
|  |  |  | Banco Popular |  |  |  | Intersegment
(In thousands) |  |  |  | de Puerto Rico |  | Popular U.S. |  | Eliminations
Net interest income |  |  | $ | 1,224,771 | $ | 258,416 | $ | (474)
Provision for loan losses |  |  |  | 154,785 |  | 15,266 |  | -
Non-interest income |  |  |  | 243,368 |  | 21,651 |  | (119)
Amortization of intangibles |  |  |  | 11,479 |  | 665 |  | -
Goodwill impairment charge |  |  |  | 3,801 |  | - |  | -
Depreciation expense |  |  |  | 39,505 |  | 6,715 |  | -
Other operating expenses |  |  |  | 952,894 |  | 174,585 |  | (779)
Income tax expense |  |  |  | 75,615 |  | 36,712 |  | 92
Net income |  |  | $ | 230,060 | $ | 46,124 | $ | 94
Segment assets |  |  | $ | 29,841,854 | $ | 8,629,439 | $ | (31,397)
December 31, 2016
|  | Reportable |  |  |  |  |  |
(In thousands) |  | Segments |  | Corporate |  | Eliminations |  | Total Popular, Inc.
Net interest income (expense) | $ | 1,482,713 | $ | (60,658) | $ | - | $ | 1,422,055
Provision (reversal) for loan losses |  | 170,051 |  | (35) |  | - |  | 170,016
Non-interest income |  | 264,900 |  | 35,705 |  | (2,669) |  | 297,936
Amortization of intangibles |  | 12,144 |  | - |  | - |  | 12,144
Goodwill impairment charge |  | 3,801 |  | - |  | - |  | 3,801
Depreciation expense |  | 46,220 |  | 654 |  | - |  | 46,874
Other operating expenses |  | 1,126,700 |  | 68,694 |  | (2,578) |  | 1,192,816
Income tax expense (benefit) |  | 112,419 |  | (33,617) |  | (18) |  | 78,784
Net income (loss) | $ | 276,278 | $ | (60,649) | $ | (73) | $ | 215,556
Segment assets | $ | 38,439,896 | $ | 4,982,113 | $ | (4,760,400) | $ | 38,661,609
Additional disclosures with respect to the Banco Popular de Puerto Rico reportable segment are as follows:
December 31, 2018
Banco Popular de Puerto Rico
|  |  |  | Consumer |  | Other |  | Eliminations |  | Total Banco
|  | Commercial |  | and Retail |  | Financial |  | and Other |  | Popular de
(In thousands) |  | Banking |  | Banking |  | Services |  | Adjustments [1] |  | Puerto Rico
Net interest income | $ | 584,293 | $ | 892,735 | $ | 5,201 | $ | (51) | $ | 1,482,178
Provision for loan losses |  | 105,604 |  | 92,838 |  | - |  | - |  | 198,442
Non-interest income |  | 84,762 |  | 311,775 |  | 95,199 |  | 101,202 |  | 592,938
Amortization of intangibles |  | 208 |  | 4,275 |  | 4,137 |  | - |  | 8,620
Depreciation expense |  | 17,668 |  | 25,222 |  | 614 |  | - |  | 43,504
Other operating expenses |  | 276,158 |  | 718,990 |  | 71,344 |  | 6,520 |  | 1,073,012
Income tax expense |  | 76,255 |  | 100,925 |  | 7,903 |  | (63,888) |  | 121,195
Net income | $ | 193,162 | $ | 262,260 | $ | 16,402 | $ | 158,519 | $ | 630,343
Segment assets | $ | 27,712,852 | $ | 22,712,950 | $ | 376,992 | $ | (12,765,098) | $ | 38,037,696
[1] Includes the impact of the Termination Agreement with the FDIC and the Tax Closing Agreement entered into in connection with the FDIC transaction. These transactions resulted in a gain of $102.8 million reported in the non-interest income line, other operating expenses of $8.1 million and a net tax benefit of $63.9 million. Refer to Notes 10 and 37 to the Consolidated Financial Statements for additional information.
December 31, 2017
Banco Popular de Puerto Rico
|  |  |  | Consumer |  | Other |  |  |  | Total Banco
|  | Commercial |  | and Retail |  | Financial |  |  |  | Popular de
(In thousands) |  | Banking |  | Banking |  | Services |  | Eliminations |  | Puerto Rico
Net interest income | $ | 518,404 | $ | 753,922 | $ | 7,499 | $ | 19 | $ | 1,279,844
Provision for loan losses |  | 8,911 |  | 244,121 |  | - |  | - |  | 253,032
Non-interest income |  | 79,630 |  | 194,741 |  | 90,222 |  | (429) |  | 364,164
Amortization of intangibles |  | 211 |  | 4,274 |  | 4,228 |  | - |  | 8,713
Depreciation expense |  | 17,338 |  | 21,120 |  | 704 |  | - |  | 39,162
Other operating expenses |  | 239,369 |  | 656,998 |  | 62,030 |  | (473) |  | 957,924
Income tax expense (benefit) |  | 93,378 |  | (31,404) |  | 10,767 |  | - |  | 72,741
Net income | $ | 238,827 | $ | 53,554 | $ | 19,992 | $ | 63 | $ | 312,436
Segment assets | $ | 21,735,909 | $ | 20,180,173 | $ | 520,717 | $ | (7,593,131) | $ | 34,843,668
December 31, 2016
Banco Popular de Puerto Rico
|  |  |  | Consumer |  | Other |  |  |  | Total Banco
|  | Commercial |  | and Retail |  | Financial |  |  |  | Popular de
(In thousands) |  | Banking |  | Banking |  | Services |  | Eliminations |  | Puerto Rico
Net interest income | $ | 472,948 | $ | 742,854 | $ | 6,172 | $ | 2,797 | $ | 1,224,771
Provision for loan losses |  | 12,884 |  | 141,901 |  | - |  | - |  | 154,785
Non-interest income |  | (91,411) |  | 232,113 |  | 103,005 |  | (339) |  | 243,368
Amortization of intangibles |  | 145 |  | 7,042 |  | 4,292 |  | - |  | 11,479
Goodwill impairment charge |  | - |  | - |  | 3,801 |  | - |  | 3,801
Depreciation expense |  | 16,956 |  | 21,684 |  | 865 |  | - |  | 39,505
Other operating expenses |  | 251,375 |  | 631,234 |  | 70,624 |  | (339) |  | 952,894
Income tax expense |  | 41,639 |  | 24,068 |  | 9,908 |  | - |  | 75,615
Net income | $ | 58,538 | $ | 149,038 | $ | 19,687 | $ | 2,797 | $ | 230,060
Segment assets | $ | 15,263,278 | $ | 17,592,743 | $ | 406,429 | $ | (3,420,596) | $ | 29,841,854
Geographic Information |  |  |
(In thousands) |  | 2018 |  | 2017 |  | 2016 |
Revenues:[1] |  |  |  |  |  |  |
Puerto Rico | $ | 1,953,671 | $ | 1,527,758 | $ | 1,361,663 |
United States |  | 357,680 |  | 318,093 |  | 283,349 |
Other |  | 76,020 |  | 75,280 |  | 74,979 |
Total consolidated revenues | $ | 2,387,371 | $ | 1,921,131 | $ | 1,719,991 |
[1] Total revenues include net interest income, service charges on deposit accounts, other service fees, mortgage banking activities, net gain on sale of debt securities, net loss on trading account debt securities, other-than-temporary impairment losses on debt securities, net (loss) gain, including impairment on equity securities, net gain (loss) on sale of loans, including valuation adjustments on loans held-for-sale, adjustments (expense) to indemnity reserves on loans sold, FDIC loss share income (expense) and other operating income.
Selected Balance Sheet Information
(In thousands) |  | 2018 |  | 2017 |  | 2016
Puerto Rico |  |  |  |  |  |
Total assets | $ | 36,863,930 | $ | 33,705,624 | $ | 28,813,289
Loans |  | 18,837,742 |  | 17,591,078 |  | 16,880,868
Deposits |  | 31,237,529 |  | 27,575,292 |  | 23,185,551
United States |  |  |  |  |  |
Total assets | $ | 9,847,944 | $ | 9,648,865 | $ | 8,928,475
Loans |  | 7,034,075 |  | 6,608,056 |  | 5,799,562
Deposits |  | 6,878,599 |  | 6,635,153 |  | 6,266,473
Other |  |  |  |  |  |
Total assets | $ | 892,703 | $ | 922,848 | $ | 919,845
Loans |  | 687,494 |  | 743,329 |  | 755,017
Deposits [1] |  | 1,593,911 |  | 1,243,063 |  | 1,044,200
[1] Represents deposits from BPPR operations located in the U.S. and British Virgin Islands.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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